Virgin won’t give “commitments that are unrealistic” in
order to buy control of budget airline Tiger Airways Holdings
Ltd.’s local unit, Chief Executive Officer John Borghetti said
in an interview yesterday. The carrier reported first-half
profit that missed analyst estimates amid competition with
Qantas Airways Ltd. and the impact of a carbon tax.

A cancellation of the takeover would deal a blow to
Borghetti’s plans to challenge Qantas’s 65 percent share of the
Australian market. Virgin has added business class seats,
upgraded lounges and extended flights to outback areas as it
seeks to win business from the country’s largest operator, which
has the biggest shares of leisure flights, corporate accounts
and routes in remote areas.

“If there is anything that stands in its way that doesn’t
make it attractive for us, I have no problem in not continuing”
the Tiger deal, Borghetti said by phone. “If there are
conditions imposed on the deal that I don’t believe is prudent
for this company to commit to, we will walk.”

‘Muted Competition’

Australia’s antitrust regulator said Feb. 7 that Virgin’s
attempt to buy 60 percent of Tiger Australia risked “muted
competition following the reduction in the number of airline
groups within Australia.” The Australian Competition and
Consumer Commission would be more inclined to allow the deal if
it was convinced that Virgin would boost Tiger’s fleet from 11
at present to 35 by 2018, according to the regulator.

Tiger’s largest shareholder, Singapore Airlines Ltd., is
helping to fund the takeover through buying A$105 million ($108
million) of newly-issued Virgin shares, giving it a 10 percent
stake in the carrier. Borghetti’s also spending about A$95
million in cash and shares buying Skywest Airlines Ltd., which
operates regional routes mainly in Western Australia state.

Virgin “faces challenges in turning around the mounting
losses within Tiger,” Russell Shaw, an analyst at Macquarie
Group Ltd. in Sydney, wrote in a note to clients Feb. 1.

Tiger does not plan to and won’t seek new investors for
Tiger Australia if the regulator disapproves the venture with
Virgin, the budget carrier said in a statement Feb. 7. “Virgin
is the right party to partner Tiger, and will be able to
strengthen Tiger Australia,” the airline said in the statement.

Virgin shares slumped the most in almost six months
yesterday after the company said net income fell 56 percent to
A$23 million in the six months through December, missing the
A$50 million median estimate of six analysts surveyed by
Bloomberg News. The stock closed down 5.8 percent at 41
Australian cents, compared with a 1 percent drop in the
benchmark S&P/ASX 200 index.

Virgin Australia doubled the proportion of seats filled in
business class as it signed up corporate customers, Borghetti
said, without giving specific numbers. The carrier now gets more
than 20 percent of sales from corporate customers, while Qantas
says it has an 84 percent share of revenue in the market.